Hey guys, I've been having the same problem, and found a possible solution over at a Google discussion forum. Here's the answer (which I haven't tried yet):

"The wp-openid plugin doesn't actually create or setup your OpenID URL,
it only allows OTHER people with OpenIDs to login to YOUR blog. I can
see how this would be confusing, and it will either be improved later
on (by including the wp-yadis/delegation functionality) or shipping an
OpenID provider with the plugin.

For now, you'll need to install this plugin to setup your blog as your OpenID:

Although setting up my blog AS my OpenID _might_ solve the problem I already have a 3rd Party OpenID. I've been able to login just fine with the 3rd party OpenID URL as well as _occasionally_ with my blog as a delegate to it but now I'm getting this error more often than not. Other services are validating my url as a delegate just fine.... any ideas?

I've updated the php-openid library and released v2.1.6. I tried using http://www.richardsilverstein.com/ on my site, and discovery worked fine. of course I couldn't authenticate, but it at least discovered the openid server alright and sent me over to MyOpenID.